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NSW govt buys back coal mining licence

The NSW government has bought back an exploration licence that could have led to coal mining on productive farming land in the Upper Hunter region.

Premier Mike Baird and Deputy Premier Troy Grant have announced an agreement with BHP Billiton to buy back the Caroona licence issued in 2006 for underground mining, covering about 344sq km in the Liverpool Plains.

"The Liverpool Plains provide some of the most productive and valuable farming land in Australia, home to the iconic black soils and generations of successful food and fibre producers," Mr Baird said in a statement on Thursday evening.

The decision has been met with positive reactions from The Greens and NSW Farmers, who described it as a turning point in the battle to protect Australia's most productive agricultural land.

"It's wonderful to see Government giving due consideration and priority to agricultural resources, a 12 billion dollar industry in NSW," NSW Farmers president Derek Schoen said in a statement.

"The Liverpool Plains is one of the country's iconic food-producing regions and we're pleased to see this protected as we transition out of the mining boom."

His comments were echoed by State Greens MP Jeremy Buckingham, who described the decision as a "historic victory".

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"The NSW Government has today woken up to the reality that new coal mines are unviable and the Greens are calling on Mike Baird to commit to a transition plan away from coal," he said in a statement.

Mr Baird said the NSW Government would increase its efforts to remove all such licences from the Liverpool Plains.

"The NSW government has determined that coal mining under these highly fertile black soil plains, as proposed by Labor, poses too great a risk for the future of this food-bowl and the underground water sources that support it," he said.

BHP Billiton president Mike Henry acknowledged the agreement in a statement released on Thursday night, saying while BHP would have conducted mining responsibly, he accepted the Government's decision and appreciated its willingness to work with the company to reach a decision.